Contractor PQC Financial Requirements

Transcription

1 Guideline Capital Works Management Framework Contractor PQC Financial Requirements

2 Guideline : Contractor PQC Financial Requirements Page 2 of 21 The suite of documents is available online ( The policy document describes the capital works management process and contains the policy requirements. Guidelines complement the policy document and expand on various aspects of the capital works management process, particularly in terms of best practice procedures. The Prequalification (PQC) System guidelines are also included in the Capital Works Management Framework suite of documents. Policy advice notes provide advice on particular policy issues and/or procurement processes relating to the planning and delivery of government building projects. The Online Toolbox provides online support to assist in the implementation of best practice planning and delivery of government building projects. It includes templates, flowcharts, guides, sample documents, and links to useful information. Contractor PQC Financial Requirements Queensland Department of Housing and Public Works October 2014 (First published in January 2001) ISBN The State of Queensland (Department of Housing and Public Works) Policy-related enquiries should be directed to: The Principal Policy Manager Building Policy Unit Building Industry and Policy Department of Housing and Public Works Telephone Licensing enquiries should be directed to: Queensland Building and Construction Commission GPO Box 5099 Brisbane Qld 4001 Telephone Fax GPO Box 2457 Brisbane Qld bpu@hpw.qld.gov.au Web info@qbcc.qld.gov.au Web

3 Guideline : Contractor PQC Financial Requirements Page 3 of 21 Contents 1.0 Introduction Structure of entity and calculation of Net Tangible Assets Current Ratio Government sector Contracting and subcontract arrangements under the PQC System Maximum Revenue Government sector Contract Value Annualised Contract Value Maximum allowable contract sizes Exceeding allowable limits in the Government Sector Contractor financial capacity assessment process Right to information Attachment 1: Attachment 2: Definition of a government building project Determining Maximum Revenue in the Government Sector (Maximum Revenue-Govt). 17 Attachment 3: Attachment 4: Terminology and links 18 Financial assessment supporting information. 20

4 Guideline : Contractor PQC Financial Requirements Page 4 of Introduction 1.1 The Queensland Government is a major procurer of building projects undertaken in Queensland. As both steward of public monies and Principal, the State requires particular financial capacity assurances from contractors seeking to undertake a government building project (refer Attachment 1). 1.2 This guideline provides detailed information about financial criteria considered in determining the prequalification status of a contractor, the financial capacity of a preferred tenderer, and the financial capacity assessment process for government building projects. 1.3 The financial requirements set out in this document: a) provide the basis for contractors seeking registration on the Queensland Government s Prequalification (PQC) System b) allow the Department of Housing and Public Works (DHPW) to maintain a whole-of- Government framework covering the tendering, selection and acceptance processes for government building projects c) are applied by the Queensland Building and Construction Commission (QBCC) when undertaking a financial capacity assessment of the preferred tenderer on all government building projects exceeding $500,000 in value, under policy requirement 9 of the (CWMF). 1.4 These financial criteria are primarily based upon, and should be read in conjunction with, the prevailing Minimum Financial Requirements as issued from time to time by the QBCC. 1.5 For all government building projects that involve building work' as defined by the Queensland Building and Construction Commission Act 1991 (QBCC Act), the contractor must hold a contractor's licence of the appropriate class issued by the QBCC. 1.6 The fundamental principle of these financial requirements is that the required Net Tangible Assets recognised by the Government (NTA-Govt, refer section 2), of prequalified contractors need to be legally and beneficially owned by the contractor (assets held by a contractor as trustee or manager of a trust are not included in the calculation of NTA-Govt). In turn, this amount of NTA-Govt is used to calculate the Maximum Revenue in the Queensland Government sector (Maximum Revenue-Govt, refer section 5) and the Maximum Annualised Contract Value (refer to Section 8.3) the contractor is permitted to undertake in this sector. 1.7 The policy objectives of these requirements are to reinforce security of payment on Queensland Government building projects and to ensure that the majority of sound wellmanaged building industry contracting businesses in Queensland are not subjected to unreasonable levels of reporting and red tape. For many businesses, the requirements will allow greater control over business practices and help to improve their financial management and long term viability. 1.8 The financial requirements set out in this document are also designed to further improve the Queensland building industry's viability. 1.9 The requirements consider typical business structures currently operating in the industry and provide definitions of key criteria for the assistance of contractors and their financial advisors In this document, contractor means any individual, company or other person (including partnerships, joint ventures, and groups of related companies) that tenders to, or contracts directly with, a government department on a government building project.

5 Guideline : Contractor PQC Financial Requirements Page 5 of Where the nature of the work to be undertaken under the government building project requires that the contractor be appropriately licensed with the QBCC, it is imperative that partnerships and joint venture arrangements satisfy licensing requirements. In the case of a formal partnership recognised by the QBCC (which must be a partnership arrangement that is effected in accordance with the Partnership Act 1891, as well as being an arrangement recognised as a partnership by the QBCC), at least one party must be licensed by the QBCC. In any other partnership or joint venture arrangement (which is not recognised by the QBCC), all parties must be licensed by the QBCC. Similarly, in the case of a group of related companies, each company in the group must be licensed by the QBCC, unless a formal partnership exists (as outlined above) Government will periodically review these requirements in association with representatives of the building industry and the accounting profession. 2.0 Structure of entity and calculation of Net Tangible Assets 2.1 Contractors are encouraged to discuss their individual situation with their accountant and/or solicitor when considering any issues or options under this section. 2.2 For the purposes of registration on the PQC System and contracting on government building projects invited under the PQC System: a) the Net Tangible Assets recognised by the Government (NTA-Govt) of a contractor, used to determine their Maximum Revenue in the Queensland Government sector (refer section 5.0), need to be legally and beneficially owned by the contractor (assets held by a contractor as trustee or manager of a trust are not included in the calculation of NTA-Govt) b) personal furniture, boats and trade or barter dollars are excluded from NTA-Govt c) related entity loans and investments (whether collectible or not collectible) to a related entity (as defined in the prevailing Minimum Financial Requirements), subsidiaries or an associated entity (as defined in the prevailing Minimum Financial Requirements) and Deeds of Covenant and Assurance provided on behalf of the contractor to satisfy QBCC licensing requirements are excluded from NTA-Govt. d) where a central treasury function is in place, this is regarded as a related entity loan e) all debts incurred by related entities are regarded as related entity loans f) unsecured asset loans and unlisted investments are excluded from NTA-Govt g) liability loans (whether secured or unsecured) are included in the calculation of NTA- Govt h) arrangements under a registered Class Order made in accordance with Australian Securities and Investment Commission (ASIC) Class Order (CO 98/1418) are not recognised when determining a contractor s NTA-Govt i) asset revaluation reserves (resulting in a material increase greater than 10% in the asset position of a contractor) are excluded when determining a contractor s NTA-Govt, unless supported by valuations from a registered valuer (copy of valuation must be evidenced). In this regard, note that asset revaluation reserves can only be derived from non-current assets

6 Guideline : Contractor PQC Financial Requirements Page 6 of 21 j) real property (which is not listed on the market) is not to be classified as a current asset. Further, real property which has been listed on the market for an extended period of time (i.e. greater than 12 months), whether continuously or not, and including being relisted separately or in different parcels or otherwise altered and relisted, is not to be classified as a current asset k) all matters subject to litigation are classified as contingent and therefore excluded when calculating NTA-Govt, unless an offer has been made and accepted, or a judgement handed down and an amount awarded (excludes matters subject to adjudication in accordance with the Building and Construction Industry Payments Act 2004) l) in the absence of reasonable proof of collectability 1, trade debtors 90 days and over will be deducted in full when determining a contractor s NTA-Govt m) in relation to the level of securities and retentions provided by the contractor, where it is considered that these securities and retentions may be called up, the NTA-Govt of the contractor may be reduced by the amount, or portion, of such contingent liabilities n) contractors are not permitted to undertake government building projects as a trustee or manager under trust arrangements o) contractors are required to have an Australian Business Number (ABN) registered for Goods and Services Tax in the name of the contractor (not as trustee or manager for a trust). 2.3 Assets held by a trustee or manager under trust arrangements are excluded when calculating NTA-Govt. However, any liabilities incurred by the contractor in any role it may have as a trustee or manager for a trust must be deducted from the assets of the contractor when calculating NTA-Govt. If, however, the trustee or manager for a trust has a recognised right of indemnity to the assets of the trust relevant to the trust liabilities incurred, then the value of the indemnity may be set off against the trust liabilities. Assets which are excluded for the purposes of calculating NTA-Govt (as defined in section 2.2) are also to be excluded from the assets of the trust when calculating the value of the indemnity. 2.4 Individual circumstances for each contractor provide case-by-case opportunities for resolving any shortfall in the required NTA-Govt. Such opportunities may generally include: a) injection or transfer of assets to the contractor b) repayment or forgiving of loans or investments made by the contractor to related entities, subsidiaries or an associated entity c) entering into a Government-approved business arrangement (i.e. a partnership, joint venture or group of related companies) where the agreement is evidenced and satisfactory to the Department of Housing and Public Works, and the combined effect on the NTA-Govt of the parties to the arrangement is considered appropriate (including that all parties are to be jointly and severally liable) 1 For example: a payment arrangement that has been agreed to by a trade debtor; or where the trade debtor is any government entity.

7 Guideline : Contractor PQC Financial Requirements Page 7 of 21 d) provision of an externally sourced unconditional undertaking to the contractor in a form approved by Government. The undertaking would need to be specific to the project and meet the requirements of the Government s Financial and Performance Management Standard 2009 (the Standard is subordinate legislation to the Financial Accountability Act 2009) e) the contractor's stated commitment that any acceptance on a government building project in excess of the contractor's Maximum Annualised Contract Value, calculated under the One-Third Rule (refer to section 8.3), will be conditional on the contractor entering into a Government-approved Deed of Guarantee and Indemnity. In such cases, the contractor s NTA-Govt is artificially inflated by a portion (determined by Government) of the NTA-Govt of the non-contractor entity/ies (Guarantor/s). Upon any acceptance of the contractor s commitment by Government, all subsequent offers submitted by the contractor are to be submitted in accordance with such acceptance. 2.5 Contractors may elect to make submissions to the PQC Registrar, from time to time, for the consideration and possible acceptance of alternative means of increasing their NTA-Govt. 2.6 The means identified in section 2.4 a) and b) by which a contractor's NTA-Govt may be increased may be equally recognised by the QBCC for licensing purposes. Separate application, supported by an appropriate report from the contractor s accountant or auditor, will need to be made to the QBCC, where applicable, to increase the contractor's Maximum Revenue for licensing. 2.7 Prequalified contractors must ensure that: a) their financial arrangements and status meet the prescribed requirements set out in this document, relevant to their PQC registration status and current commitments b) the PQC Registrar is informed at all times with regard to material fluctuations in their financial status that may affect their PQC registration status. 2.8 At entirely the discretion of the Government, investments in non-related entity publicly listed companies may be acceptable Contractors operating in partnership or joint venture with other individuals and/or companies are required to maintain, and make available, documentation that evidences the partnership or joint venture and the assets of the partnership or joint venture. However, any limitation of liabilities among the parties to the partnership or joint venture will not be acceptable Where a contractor is based overseas or relies, in some form, on an overseas parent and/or partner to meet any part of the NTA-Govt requirements, the contractor must negotiate the acceptability of such arrangements with Government on a case-by-case basis. 2 In instances where a contractor has provided details of such investment for the purposes of a financial capacity assessment, and is reliant on same to pass the assessment, a concern will be raised by the QBCC and notified to the PQC Registrar for review and consideration.

8 Guideline : Contractor PQC Financial Requirements Page 8 of Current Ratio Government sector 3.1 Contractors must be able to satisfy the Current Ratio test outlined in the QBCC s Minimum Financial Requirements (currently 1:1). This test assists in identifying whether or not a contractor can meet debts when they fall due and is to be calculated in accordance with the formula provided in the Minimum Financial Requirements and any relevant Australian Accounting Standards. 3.2 However, for Government contracting: a) current assets are: i) to be drawn from the NTA-Govt defined as allowable under section 2 ii) to include any recognised right of indemnity to the assets of a trust relevant to the liabilities included under section 3.2 b) b) current liabilities are to be drawn from the liabilities incurred by the contractor in any of its dealings, including any liabilities incurred as trustee or manager for any trust c) any trading surplus is to be notionally distributed to beneficiaries as it would be at the end of an income year before calculations in 3.2 b) are made. 3.3 When identifying any indemnity from a trust under section 3.2 a), current assets of the trust exclude: a) furniture, boats and trade or barter dollars b) related entity loans and investments (whether collectible or not collectible) to a related entity, subsidiaries or an associated entity c) unsecured asset loans and unlisted investments. 3.4 Real property must be listed for sale on the market to be recognised as a current asset. However, real property which has been listed on the market for an extended period of time (i.e. greater than 12 months), whether continuously or not, and including being relisted separately or in different parcels or otherwise altered and relisted, will not be recognised as a current asset. 3.5 Term deposits used as security for bank guarantees given by a contractor are excluded from current ratio calculations. 3.6 Loans or investments from a related entity, subsidiaries or an associated entity are generally treated as current liabilities. For a loan or investment from a related entity, subsidiary or associated entity to be treated as a non-current liability, evidence to that effect (such as minutes of a meeting of directors or a stamped loan agreement detailing when the loan is repayable) is required. However, the asset accounts of the related entity, subsidiary or associated entity must be similarly classified (evidence of such is also required).

9 Guideline : Contractor PQC Financial Requirements Page 9 of Contracting and subcontract arrangements under the PQC System 4.1 The prequalified contractor shall only submit tenders invited under the PQC System in the name and associated ABN of the contractor registered on the PQC Database. 4.2 All claims for payment under government building projects entered into with the State are to be made under the ABN registered to the name of the prequalified contractor engaged under that contract, or as requested from time-to-time to a third party in accordance with contract provisions. 4.3 The contractor shall only engage in subcontracts and supply agreements in the name and ABN of the prequalified contractor engaged under that contract. 5.0 Maximum Revenue Government sector 5.1 Attachment 2 (which is an adaptation of the table contained in the QBCC s Minimum Financial Requirements) is to be used to determine the Maximum Revenue in the Queensland Government sector (Maximum Revenue-Govt) in each financial year for contractors wishing to undertake government building projects. By knowing a contractor's NTA-Govt (refer section 2) and applying this value to the formula provided (refer Note 1 in Attachment 2) the contractor s Maximum Revenue-Govt can be calculated. 5.2 For Queensland Government sector consideration, a contractor's revenue may include all of the activities undertaken by the contractor in the Queensland Government sector regardless of whether these fall within the scope of building work' as defined in the QBCC Act. Example only Where a contractor has an NTA for licensing of $400,000, of which $60,000 comprises related entity loans (not recognised in the Queensland Government sector), the following would apply: under the QBCC s Minimum Financial Requirements (using $400,000), this contractor may be entitled to undertake work up to a Maximum Revenue for licensing of $9,777,771; and on deducting the $60,000 of related entity loans, the contractor would have an NTA-Govt of $340,000 and a Maximum Revenue-Govt of $8,111, Section 2.4 provides guidance on how contractors may seek to resolve any shortfall in the required NTA-Govt. 5.4 In every circumstance 3, the Maximum Revenue-Govt of the contractor cannot exceed the Maximum Revenue permitted by any QBCC licensing requirements 4. 3 Exception: In relation to a financial capacity assessment of a partnership which is recognised by the QBCC and where only one party is licensed, a concern will be raised by the QBCC and notified to the PQC Registrar (for review and consideration), where the Maximum Revenue-Govt exceeds the Maximum Revenue for licensing. 4 i.e. the Maximum Revenue for the licensee as recorded in the QBCC s licensing register. In the case of a partnership, joint venture, or group of related companies, where all parties are licensed, the Maximum Revenue for licensing will be determined (for the purpose of a financial capacity assessment) by consolidating the respective licensee s Maximum Revenue for licensing (as recorded in the QBCC s licensing register).

10 Guideline : Contractor PQC Financial Requirements Page 10 of Contract Value 6.1 Generally, the Contract Value of government building projects shall be either the estimated value, or where known, the actual value of the contract. 6.2 In the case of multi-staged non-traditional forms of contract, this value will: a) at stage one, be the current estimated cost to complete the whole contract, not just the design and documentation work and early works packages to be undertaken at stage one; and b) at stage two, be the current estimated cost to complete the remaining part of the contract (note: this will exclude elements completed under stage one). 6.3 However, where this is not considered to be an accurate reflection of the anticipated expenditure under the contract, the project manager may need to consider another value. For non-traditional type contracts for construction management, where sub-contracts or trade packages are to be awarded under the contract directly to the Principal, then the Contract Value is to be calculated as the amount to be paid to the contractor/manager under the contract. 7.0 Annualised Contract Value 7.1 The Annualised Contract Value of a project, where the contract duration (excluding the defects liability period) is greater than 52 weeks, is the Contract Value (refer section 6.0) translated into an annual rate. 7.2 This translation is a straight-line calculation applying the following formula: Contract Value Contract Duration in Weeks X Maximum allowable contract sizes 8.1 The maximum allowable contract size of any government building project for which a registrant may be prequalified, is set at two limits, namely the Maximum Contract Value and the Maximum Annualised Contract Value. 8.2 The Maximum Contract Value for which a contractor registered on the PQC System may be considered eligible to tender, is determined by the PQC Registrar, giving consideration to the contractor s technical and managerial capabilities, experience and satisfactory performance on previous projects. 8.3 The Maximum Annualised Contract Value that a contractor can be considered eligible to tender for, or be considered for acceptance on the PQC System, shall be the lesser of: a) one-third of either the contractor's Maximum Revenue-Govt or Maximum Revenue for licensing; whichever is the lesser (this is referred to as the One-Third Rule) or b) the Maximum Contract Value, as defined in section 8.2, for which the contractor is prequalified under the PQC System.

11 Guideline : Contractor PQC Financial Requirements Page 11 of 21 Example only (cont d) Following the example outlined in section 5.2, where a contractor has $340,000 in NTA-Govt, the contractor would have a Maximum Revenue-Govt of $8,111,100. Depending on the contractor s demonstrated technical and managerial capabilities, documented experience and demonstrated satisfactory past performance, the contractor may be eligible for prequalification to a Maximum Contract Value (refer section 8.2) of say $3,000,000. However, under the One-Third Rule (refer section 8.3), this contractor would be limited to undertake government building projects having an Annualised Contract Value up to $2,703, Exceeding allowable limits in the Government sector 9.1 The relevant government department Chief Executive Officer (or authorised delegate) may, in consideration of the relative risks to the State and at their absolute discretion, after consultation with the Building Policy Unit, Department of Housing and Public Works, approve a recommendation for inviting or contracting with a contractor who fails to meet requirements provided in this guideline. 9.2 Reasons for such failure may include, without limitation: a) insufficient NTA-Govt b) insufficient Current Ratio. 9.3 Any such invitation or acceptance may include, but not be limited to, the contractor offering to provide an additional unconditional undertaking to the State for the satisfactory performance of the contract. Any invitation under such conditions is made by the Principal without prejudice and without commitment, and entirely at the contractor s own risk Contractor financial capacity assessment process 10.1 The process whereby contractors are assessed for financial capacity is as follows: a) contractors applying to the Government for PQC registration must do so on the Contractor PQC Application form providing, among other things, their Maximum Revenue for licensing, where applicable, and their Net Tangible Assets recognised by the Government (NTA-Govt) and Current Ratio Government sector calculated in accordance with the details provided in this guideline. b) upon successful registration on the PQC System, the contractor will be provided with a Certificate of Prequalification (PQC) with an attached schedule confirming, among other things, the contractor's PQC registration details of Maximum Contract Value and Maximum Annualised Contract Value c) any prequalified contractor tendering on a government building project with an estimated contract value in excess of $500,000, and is subsequently identified as the preferred tenderer, will be subject to a formal financial capacity assessment in accordance with these guidelines and CWMF policy requirement 9.

12 Guideline : Contractor PQC Financial Requirements Page 12 of 21 Information regarding a contractor s financial capacity to undertake a project must be sourced from the QBCC at the tender evaluation stage. The relevant department s tender section will request the QBCC to undertake a financial capacity assessment. The request needs to include certain information such as a description of the project, most accurate tender estimate/submitted tender price and level of government work underway or committed to by the contractor (as known by the department s tender section). The QBCC will undertake this financial capacity assessment on the basis of the information provided by the relevant department s tender section and the contractor's financial records. d) any request to provide financial records will be made by the QBCC and responses are to be forwarded in confidence as directed within the timeframe specified in the request. Failure to comply with any request, made pursuant to the requirements set out in this document, may result in: i) the QBCC considering that the contractor has failed to satisfy the financial capacity assessment requirements and/or ii) iii) the PQC Registrar considering that the contractor has breached the Conditions of Prequalification (PQC) and/or the Principal declining to consider or accept a tender from the contractor. e) assessments will be based upon the contractor's financial records and management accounts as follows: i) management accounts (i.e. Balance Sheet and Profit and Loss Statement) that are, as a minimum, no older than three months ii) iii) most recent end of year financial accounts consolidated accounts may be requested for a partnership iv) other supporting information (refer Attachment 4). f) the QBCC is to review the financial records and discuss (at its discretion) any issues or concerns (e.g. where clarification is required on certain information or where information required as part of the assessment has not been provided by the contractor) in the first instance with the contractor, or the contractor's nominated representative g) the QBCC will determine the contractor's financial capacity with respect to the subject building project, basing its assessment on the data provided to the QBCC (by the relevant department s tender section and the contractor) taking into account, but not limited to, such factors as: i) the above requirements ii) the going concern' convention, based on the assumption that the life of a business enterprise is indefinite with continued existence and not liquidation, tempered by the accounting doctrine of conservatism where legitimate and necessary

13 Guideline : Contractor PQC Financial Requirements Page 13 of 21 iii) iv) concerns arising from any analysis of management and other accounts, or supporting documentation provided the level of the contractor s commitments 5 (both actual and anticipated, including the proposed contract) with respect to QBCC licensing and Maximum Revenue- Govt limits v) the level of securities and retentions provided by the contractor. Where it is considered that these securities and retentions may be called up, the NTA-Govt of the contractor may be reduced by the amount, or portion, of such contingent liabilities vi) vii) any evidence received by the QBCC that relates to unsatisfactory financial performance or that may indicate financial stress of the contractor if a contractor s cash at bank amount is less than the dollar amount relating to their creditors over 90 days, the Government has the discretion to regard the financial capacity assessment as a fail 6 (the Queensland Code of Practice for the Building and Construction Industry places a responsibility on parties to consider, process, pay and finalise claims in a reasonable and timely manner). h) the QBCC will advise the government department identified in the request of the outcome of the financial capacity assessment 7. The financial capacity assessment report has a validity period of 45 business days i) if, in the view of the PQC Registrar or government department requesting the assessment, there are reasonable concerns regarding a contractor s financial capacity, the contractor may be requested to provide additional information to address such concerns j) in relation to (i) above, the contractor is to forward the additional information in confidence to the relevant party (as directed within the request) within the timeframe specified in the request k) project managers who are not directly employed by government departments and who are not subject to the provisions of the Public Service Act 2008 and the Public Sector Ethics Act 1994, are not to be provided with contractors' financial details l) the QBCC s report to the PQC Registrar on the outcome of each financial capacity assessment is to include: i) a statement advising whether or not the contractor satisfies the financial capacity assessment requirements covered in this guideline. ii) details of a licence data check, including Maximum Revenue for licensing 5 To the extent such information has been provided to the QBCC by the contractor and requesting government department. 6 A concern will be raised by the QBCC and notified to the PQC Registrar (for review and consideration) in the first instance. 7 Any financial capacity assessment report that is a pass or fail will be issued to the requesting government department and PQC Registrar. However, a financial capacity assessment report that is a pass with concerns will be issued to the PQC Registrar only, for review and consideration and subsequent release to the requesting government department (section 10.1 (i) may be relevant in this situation).

14 Guideline : Contractor PQC Financial Requirements Page 14 of 21 iii) NTA-Govt iv) Current Ratio Government sector as calculated in accordance with section 3.0 of this guideline v) the calculated Maximum Revenue in the Government sector (Maximum Revenue-Govt) vi) vii) the calculated Maximum Annualised Contract Value as calculated under section 8.3 (being one-third of either the Maximum Revenue-Govt or the Maximum Revenue for licensing, whichever is the lesser) confirmation of the name of the project being considered together with its estimated/tendered amount as provided by the requesting department viii) ix) licensing performance record relating to residential construction work in the last three full financial years, number of disputes, directions and claims on insurance notification in cases where the contractor is known to also trade as a trustee or manager for a trust x) any conclusions, recommendations, concerns or observations identified in section 10.1 g). m) where the PQC Registrar has received information from the QBCC, the details of the contractor's PQC registration will be amended accordingly and advice will be forwarded, or made available, to the contractor. This advice will include: i) the amount of Net Tangible Assets recognised by Government (NTA-Govt) ii) iii) iv) the level of Government sector Current Ratio the calculated Maximum Revenue in the Government sector (Maximum Revenue-Govt) the Maximum Revenue for licensing v) the Maximum Contract Value for which the contractor is prequalified 8 vi) the Maximum Annualised Contract Value permissible under these requirements 9. 8 The PQC Registrar does not automatically increase a registrant s Maximum Contract Value as a result of any increase in NTA-Govt. Any requests to increase a registrant s Maximum Contract Value must be supported by appropriate documentation. 9 Where a financial capacity assessment identifies that the registrant s NTA-Govt has decreased, the registrant will be advised of any corresponding reduction in their Maximum Annualised Contract Value. Similarly, where a financial capacity assessment identifies that the registrant s NTA-Govt has increased, the registrant will be advised of any corresponding increase in their Maximum Annualised Contract Value (can not exceed the registrant s Maximum Contract Value).

15 Guideline : Contractor PQC Financial Requirements Page 15 of Right to information 11.1 The Right to Information Act 2009 (RTI Act) provides members of the public with a legally enforceable right to access documents held by Queensland Government agencies The RTI Act requires that documents be disclosed upon request, unless the documents are exempt or, on balance, disclosure is contrary to the public interest Information contained in an application for prequalification, and registration details once an applicant is prequalified, are potentially subject to disclosure to third parties The State cannot guarantee that any information provided by an applicant/registrant, including information that is identified as commercial-in-confidence, will be protected from disclosure under the RTI Act Despite any other provision of the application and registration process, the State is entitled to publish on the Department of Housing and Public Works' website ( or by any other means, the names and business addresses of trading entities registered on the PQC System For more information regarding the RTI Act, please contact the RTI Officer on (07)

16 Guideline : Contractor PQC Financial Requirements Page 16 of 21 Attachment 1 : Definition of a government building project Government building project generally means a building project for a government department, as defined in the Financial Accountability Act A government building project must be owned by a government department on completion. Work covered by this definition includes: a) the erection, establishment or construction of a building; or b) any maintenance of a building assessed as high risk/significant; or c) the repair, renovation, refurbishment, alteration, extension or improvement of a building or maintenance of a building combined with any of these works; or d) the demolition or removal of a building; or e) any site work (defined as building work under the Queensland Building and Construction Commission Act 1991) related to work of any kind associated with a) to d) above as a separate contract in itself; or f) the provision of services generally (including but not limited to power, lighting, communications, security systems, fire, heating, ventilation, air conditioning, lifts, travelators and escalators, water supply, sewerage or drainage) under installation or supply and installation contracts associated with a) to d) above as a separate contract in itself, but excludes: g) service maintenance contracts associated with a building; h) the construction, maintenance or repair of a road under the Land Act 1994; i) the construction, maintenance or repair of a bridge; j) the construction, maintenance or repair of railway tracks, signals or associated structures; k) the construction, maintenance or repair of harbours, wharfs and other marine structures not related to land based building work; and l) the construction, maintenance or repair of a dam. The majority of government building projects involves construction of new buildings, extensions to buildings or major refurbishments to existing buildings. Notwithstanding, this definition should be taken as a guide only and is not exhaustive. This definition does not capture grants to organisations that are external to government departments, although government departments making grants to such organisations may, at their discretion and after receiving advice from the Department of Housing and Public Works, attach conditions to a grant to give effect to specific elements of the. Enquiries on the applicability to particular government building projects should be directed to the Building Policy Unit, Department of Housing and Public Works.

17 Guideline : Consultant PQC Invitation and Selection Process Page 17 of 21 Attachment 2 : Determining Maximum Revenue in the Government sector (Maximum Revenue- Govt) The calculation of Maximum Revenue-Govt is based on the prevailing Minimum Financial Requirements as issued from time to time by the Queensland Building and Construction Commission (QBCC). Contractors unsure about calculating their Maximum Revenue-Govt, should contact the PQC Registrar on either or , or PQCRegistrar@hpw.qld.gov.au. Criteria Category 1 Category 2 Category 3 Category 4 Category 5 Category 6 Category 7 Maximum Revenue in the Queensland Government sector (Maximum Revenue-Govt) 1 Min (a) Max (b) $600, $3,000,000 $3,000,001 - $12,000,000 $12,000,001 - $30,000,000 $30,000,001 - $60,000,000 $60,000,001 - $120,000,000 $120,000,001 - $240,000,000 >$240M NTA-Govt x Net Tangible Assets recognised by the Queensland Government (NTA-Govt) Min (c) Max (d) $36,001 - $156,000 $156,001 - $480,000 $480,001 - $1,200,000 $1,200,001 - $2,400,000 $2,400,001 - $4,800,000 $4,800,001 - $14,400,000 >$14.4M Notes 1 Formula for deriving level of Maximum Revenue-Govt between minimum and maximum NTA-Govt values expressed within Categories 1 to 7: Maximum Revenue Govt = Licensee s NTA Govt c d c x (b a ) + a For example: Where a contractor has $340,000 in NTA-Govt (refer Category 2 above), the contractor would have an Maximum Revenue-Govt of $8,111,100 by applying the above formula. 2 Under the One-Third Rule (refer 8.3) the minimum Maximum Revenue-Govt for registration on the PQC System is $1,500,000 (being three times $500,000) and the minimum NTA-Govt is $81,001.

18 Guideline : Consultant PQC Invitation and Selection Process Page 18 of 21 Attachment 3 : Terminology and links A guide to the terms used in this document is provided below. Annualised Contract Value The Annualised Contract Value of a project, where the contract duration (excluding any design, documentation or defects liability period) is greater than 52 weeks, is the Contract Value translated into an annual rate for comparative purposes. (CWMF) The is the Queensland Government's key policy for managing risks in the planning and delivery of government building projects. It identifies the major risk areas and sets out the steps that must be taken to manage those risks. The gives effect to the whole-of-government Prequalification (PQC) System for building industry contractors and consultants seeking to undertake identified contracts and commissions associated with government building projects. For further information refer to Contingent liability A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or a present obligation that arises from past events but is not recognised because: a) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or b) the amount of the obligation cannot be measured with sufficient reliability. (Source: Australian Accounting Standards Board 137 Provisions, Contingent Liabilities and Contingent Assets) Contractor Contractor means any individual, company or other person (including partnerships, joint ventures, and groups of related companies) that tenders to, or contracts directly with, a government department on a government building project, irrespective of whether or not the nature of the work requires the person/entity to be licensed under the Queensland Building and Construction Commission Act Contract Value Generally, the Contract Value of government building projects shall be either the estimated value, or where known, the actual value of the contract (refer section 6.0). Current Ratio Formula: (current assets) / (current liabilities) This needs to be read in relation to section 3.0. Deed of Guarantee and Indemnity A deed whereby the guarantor agrees to guarantee and indemnify the State and creditors in respect of the liabilities of the contractor. A copy of an approved example of a form of Deed of Guarantee and Indemnity can be provided by the PQC Registrar on request.

19 Guideline : Contractor PQC Financial Requirements Page 19 of 21 Maximum Annualised Contract Value The Maximum Annualised Contract Value that a contractor is allowed to tender for shall be the lesser of: a) one-third of either the contractor's Maximum Revenue-Govt or the Maximum Revenue for licensing; whichever is the lesser or the Maximum Contract Value (as below), for which the contractor is prequalified under the PQC System. Maximum Contract Value The Maximum Contract Value (as determined by the PQC Registrar) that a contractor is allowed to tender for, based on the contractor s technical and managerial capabilities and experience, and satisfactory performance on previous projects. Maximum Revenue-Govt The maximum revenue a contractor may earn in each financial year in the Queensland Government sector as determined by the formula used in Attachment 2 taking into account the NTA-Govt value (refer section 5.0). Maximum Revenue for licensing The maximum revenue a licensed entity may earn in each financial year as determined by the QBCC. NTA-licensing The contractor s Net Tangible Assets recognised by the QBCC for licensing purposes. NTA-Govt The contractor s Net Tangible Assets, recognised by the Government for the PQC System (refer section 2.0). One Third Rule A third of the contractor s Maximum Revenue-Govt or the Maximum Revenue for licensing, whichever is the lesser value. Prequalification (PQC) System The Prequalification (PQC) System supports the (CWMF) and Maintenance Management Framework (MMF) by providing a central register of prequalified building contractors for government building projects. Queensland Building and Construction Commission (QBCC) The Queensland Building and Construction Commission (QBCC) is a statutory authority established under the Queensland Building and Construction Commission Act 1991, which, among other things, licenses building industry contractors (refer

20 Guideline : Contractor PQC Financial Requirements Page 20 of 21 Attachment 4 : Financial assessment supporting information Supporting information to be provided by a contractor in order for the QBCC to perform a financial capacity assessment includes (but is not limited to) the following: the amount attributable to revenue earned for building work carried out for the Queensland Government, and the amount attributable to revenue earned for building work other than for the Queensland Government (identified separately) the amount allowed for bad or doubtful debts relating to debtors (if any) in the current Balance Sheet amounts provided for securities or retentions to which recourse has been claimed or threatened or is likely to be claimed or threatened in relation to real property listed for sale on the market, and classified as a current asset in accounts, details of the real property (i.e. location, amount it is valued at in the books, when it was placed on the market, with whom it has been listed and the amount it has been listed for, how long the real property has been classified as a current asset) details of any debtors that are related entities details of any term deposits used as security for bank guarantees provided by the contractor in relation to the Asset Revaluation Reserve (resulting in a material increase greater than 10% in the asset position of the contractor), a copy of the valuation/s from a registered valuer supporting the revaluation/s. In this regard, note that asset revaluation reserves can only be derived from non-current assets aged listing of trade debtors and trade creditors which must distinguish between retentions and securities, and other debtors and creditors. Alternatively, the contractor may provide two lists, one for securities and retentions, and one for the balance of debtors and creditors aged listing of Work in Progress (WIP) value of any bank guarantees provided by the contractor value of any building work, other than for the Queensland Government, which is underway or under contract the amount/s of any undrawn bank facilities (e.g. overdrafts, lines of credit) details of any debts owed by or to the contractor which are the subject of proceedings in a court or tribunal details of any trusts the contractor is trustee or manager for (including management accounts for such trusts) details of any payment arrangements with trade creditors, the Australian Tax Office, or Office of State Revenue if the contractor is part of a group of companies, details of the structure of the group

21 Guideline : Contractor PQC Financial Requirements Page 21 of 21 if loans from related entities, subsidiaries or associated entities are treated as non-current liabilities, evidence in the form of minutes of a meeting of directors or a stamped loan agreement. The asset accounts of the relevant related entity, subsidiary or associated entity must be similarly classified and provided if the contractor operates in a partnership, joint venture, or group of related companies, details of the arrangement (including the information outlined above relative to the partnership, joint venture or group of related companies). Note: Consolidated accounts may be requested for a partnership. Important Note: In addition to the supporting information outlined in this attachment, a contractor will be required to provide a signed declaration that (among other things) all information provided to the QBCC reflects a true and fair view of their financial position. In this regard, note that financial statements must comply with all applicable Australian Accounting Standards. If a contractor is to be subject to a financial capacity assessment, the QBCC will forward a letter to the contractor detailing the required financial information, including a declaration form to be signed.